The impact of habits

We are what we repeatedly do. Excellence then, is not an act, but a habit
— Aristotle


Habits are what get us from point A to point B in the quickest amount of time and can be both fantastic and crippling. They are the actions we can do without even thinking about them.

Most of us have a morning routine that we follow. Get up, eat, shower, get dressed, brush our teeth, watch the news, jump in the car and set off for work is one example. All these actions are quite commonly done automatically, without a single thought.

Our lives have a definitive form and structure to them and it is all our habits combined that make up this form. Habits may have little impact on their own, but over time and all put together, they have enormous impacts on our health, financial security, productivity and happiness.

The brain is always looking for shortcuts and ways to increase efficiency. The brain transforms as many actions as possible into habits so that we don’t need to think about it, freeing up more brain space for other challenges. If the habit is a productive one then this is great, but how do we recognise and break a bad habit? Or start a good habit?

First we must understand how habits are formed.


What makes up a habit?

In the Charles Duhigg book: The power of habit, he breaks down habits into a 3-step loop

Step 1: Cue. The cue is a trigger that tells our brain which action to take.

Step 2: Routine. The action itself. It can be physical, mental or emotional.

Step 3: Reward. The type of reward helps our brain to figure out if this particular habit loop if worth remembering in the future. If so, we have a new habit.

Our cravings are what power the habit loop and make it so hard to break. Cravings tie the cue and routine to the reward.


When drinking alcohol we think of the reward of feeling relaxed or socialisation (cue). This reward anticipation leads us into action (routine). We finally get our reward. Although too much alcohol may be more of a punishment than a reward!

When buying lotto tickets we think of what we would do with all that money (cue). Of course we have to buy a ticket now (routine). We experience small wins here and there, or near misses, which is enough to keep us buying tickets (reward). Studies have shown by studying the brain activity of gamblers, that near misses are often perceived as wins. As you can imagine this can be very dangerous and also applies to investing. It is no coincidence that most scratchies are ‘almost wins’. They know if we lost by a large margin we wouldn’t buy more.

When supermarket shopping when hungry we think how good those chippies would taste (cue). We buy the chips (routine) and we experience the reward upon eating.

When we get a cell phone alert whilst driving (cue) we are compelled to check our phones (routine) so that we can see what it is (reward). In reality, nothing is more important than our own or other people’s lives, yet we still do it. If we don’t look we tend to get a nagging craving to look, and if that craving isn’t satisfied then we become distracted and frustrated.

Marketers often prey on our habitual urges making it even easier to act. The more we act on these cues and rewards, the more automatic the actions become until a habit is born.

Think about how difficult it was to drive a car for the first time. We had to consciously think of so many things at once. The mirrors, the clutch, the gas pedal, the breaks, the gear stick, the steering wheel. It is a lot of new information to process. Over time though, these acts all became automatic (especially if you have an automatic car!), until we can drive the car without even really thinking about it.


When a habit emerges, the brain stops fully participating in the decision making. So, unless we deliberately fight a habit and find new routines, the pattern will unfold automatically which is why they are difficult to break.


How to break the habit loop

We must first realise that we have a habit, which is easier said than done. We may have habits that we don’t even realise are habits. Habits are always there, they are just waiting for the right cues and rewards from our 3 step habit loop. This is just becoming aware of what we are doing all the time and why. This is very mentally draining at the beginning but once the new actions become a habit then this mental effort will not last long.

Once we realise which habit we would like to change then we need to look at altering the cues and rewards that feed the habit. This is very difficult because we have become familiar with the current cues and rewards. Why would I exercise when I am comfortable sitting on the couch watching TV? The reward of better health and fitness needs to be great enough to outweigh the current reward of comfort.

A habit cannot be replaced cold turkey. It needs to be replaced with something new that can provide us with a similar reward or the habit won’t become long lasting. There is always that old ‘better’ habit lurking in our minds.

One trick is instead of thinking about what we are missing out on (comfort food on the couch with good TV), then focus on what we are gaining (health and fitness). We could also think of the negatives of being sedentary. In other words, turn your current bad habits into negative experiences, and your new, desired habits into positives.

If you have ever had a conversation with a crossfit junkie, they are so passionate about what they are doing. They have found their reward as it generally comes in the form of better health and camaraderie. If they weren’t getting these rewards then it would be very difficult for it to be a habit.

The key is to find our passions and our goals in life and then we can much easily align our rewards to those activities that achieve these goals, not hinder them.


Just because you know you have bad habits it doesn’t make it easy to change

It is all very well to understand that we need new cues and rewards, but we still need determination to follow through. Habits can take a couple of months of hard slog to form. Think of starting a gym programme. For me personally, I feel like the first couple of weeks isn’t too bad. I’m excited at doing something new and making a change. It is that 2-6 week mark that is very difficult for me to stick at it. If it is important to us, we somehow need to keep pushing through all the feelings that are telling us not to do it.

Tip: exercising with friends or telling other people of your plans can help because you are more inclined to take ownership and not disappoint. Communities can create an enormous source of belief and support. If they can do it, why can’t I. Seeing other people make their own changes can be quite inspirational.

Times will get hard and we will get stressed. The more support we can garner, the better.

Note: Our social groups can also make it more difficult for us to break habits too. If we interact with big drinkers, high spenders or other smokers, it becomes an even bigger challenge to change a habit that is central to our interactions.


How can we make a new habit easier to form?

I have had a very difficult time starting to floss my teeth. It is not something I enjoy doing and it all seemed a bit difficult having to do string origami to get the floss around my fingers.

I saw a pre made floss brush in the supermarket and that is all that was needed to make something that seemed so difficult to me into a habit.

Recommendation 1 – Reduce the steps required to perform the new act. For flossing, this was reducing the act of tying the floss around my fingers. For going to the gym this could be laying out your clothes the night before. The more steps you can reduce between thinking and doing, the easier it is to form the new habit.

Note: The converse is also true. If you wish to stop a bad habit, you can INCREASE the number of steps required to act. If your bad habit is watching TV for hours on end, position the TV so it is not facing the couch.If your bad habit is spending too much money, put your money in an account that is hard to access.


Recommendation 2 – Reducing the difficulty of performing the new act. I never used to invest in stocks because it all seemed far too difficult with all the options, not to mention the amount of money needed to start investing. I started to read up on the subject, as well as seeking professional advice until I could understand. Now I am much more confident in investing and it is most definitely a habit. The new index funds, such as smartshares, do not even require much start up cash either. Anyone can really do this.

The best way to make things easier to learn/do is instead of thinking of the activity as a whole, try to break it down into more manageable and more easily understood parts. This is where a trained professional can really help the novice and be worth their money in gold.


Recommendation 3 – Sleep. Getting enough sleep is critical in living a productive life. If we are not getting enough sleep our thinking becomes impaired, our will power is weakened and we are not as strong individuals as we could be.


Action plan

1/. Identify the routine and understand the 3 stages of the habit loop.

2/. Become more aware of your habits and which ones may be bad for you. Isolate the cue. Do you eat breakfast because you’re hungry? Because it’s 07:00AM? Because the kids are eating? Because you got dressed? Write down 5 things you remember when the cue hits. You could write where you are, what you are feeling, what time it is, who else is there, what were you doing when the urge hit, etc. Writing is a very powerful tool in that it raises awareness and helps us to remember.

3/. Look for ways to replace these habits by using new rewards. Play around with different rewards until you find one that works for you. Different rewards will determine which cravings are driving our behaviour.

4/. Have a plan. Once you have your cue and reward, make these new habits even more long lasting by using the recommendations that work for you. Whether that is using social groups, reducing the number or steps or reducing the difficulty. Exercising at the start of the day is much easier for me than at the end of the day so that is my plan for exercising.

Also note that as we age, our goals in life may also change. At this point it is always a good idea to re-evaluate our habits using the process above to make sure they don't move too far out of alignment with our goals. 



Willpower isn’t a skill, it’s a muscle. It gets tired as it works harder. Do you find that it is much harder to be stronger at the end of the day than it is at the beginning when you have already had a string of things already testing your willpower throughout the day?

If we can strengthen our willpower in one part of our life, such as exercise, then it becomes stronger in other parts, perhaps smoking. Then we may want to eat healthier, we may be sleeping better and we could even be saving more because we have less time to spend. It can have a real positive snowball effect.

We become better at regulating our impulses, at learning how to distract ourselves from temptations. We are changing the way we think. Once we get in this groove of controlling our willpower and creating good habits, our brains are well practiced at helping us to reach our life goals.


Final Thoughts

We need habits to function or else our minds would explode from overthinking. Maybe not explode, but you get the idea. We need to only isolate the habits that are preventing us from reaching our goals. I may not be achieving my savings goals because I have a terrible habit of overeating when stressed. This is an example of a habit that needs changing. My habit of brushing my teeth does not need changing because I already do this twice a day and it doesn’t interfere with achieving my goals.

Always remember that we are only human. We do slip up. The road is hard. The best things for us are often the hardest to achieve. Accept that mistakes are OK. Don’t beat yourself up too much. Don’t set unrealistic goals either. Everything in moderation is what life should be about. We shouldn’t be looking to deprive ourselves of everything we like. We just need to stop overindulging in things that are preventing us from living the lives we desire.

We are often looking for quick fixes. Breaking habits is no different. Unfortunately though, it is not quick. It is difficult and requires hard work. It is hard to understand why we behave a certain way. It is hard to change the behaviour. It is hard to maintain the new behaviour. Hard to keep the old behaviour at bay. But remember, change is hardest at the beginning and it does get easier with time.



The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here


What are some habits that you would like to kick to the curb but have difficulty in doing so? Have you managed to successfully kick a bad habit or start a new habit? Comment below.